Housing Minister Simon Coveney is under pressure to allow landlords to offset the local property tax against tax on rental income.

The measure is among a number of changes being sought by Fianna Fáil as part of incentives to increase the number of properties available for rent - and ultimately help ease the ongoing upward spiral in rents. The party's finance spokesman, Michael McGrath, argued that the measure should be implemented without delay and that the Government must also speed up a return to a 100pc offset of mortgage relief for landlords.

The Government is already committed to a phased return of the 100pc mortgage tax relief for landlords. "But this must be accelerated if we are to have any hope of increasing supply of homes for rent, which is now urgently required," Mr McGrath told the Irish Independent.

Mr McGrath also said there was a "cast-iron case" for allowing the local property tax to be offset against income tax.

"This is a legitimate expense and I just don't understand why it is not treated as such. Already, independent observers have recommended that it be treated as fully deductible for taxation purposes," he said.

One source has put the cost of the incentive package at €24m in a full year. Already, the Government allows 80pc of mortgage costs to be offset against tax.

There are plans to phase this up to 100pc in 5pc instalments each year. It is understood that an immediate switch to 100pc would cost the Exchequer up to €150m - but the Fianna Fáil demand may be difficult to resist if they push it to the maximum.

Mr Cowen said that this would help end the backlog of unsold second-hand homes in smaller towns around the country.

He said this backlog was depressing the housing market in areas away from the big population centres.

The prospect of this happening, however, remains unclear. Already, Fianna Fáil has successfully demanded an independent assessment of the scheme, which offers a 5pc tax rebate to first-time buyers of new homes to a maximum of €20,000, to ensure that it does not inflate prices.

This review is to be completed by September to allow any changes happen in the Budget next October.